Deccan Chronicle Holdings Ltd.

Reset to print growth BUY

CMP 1 Year Target Price Expected Appreciation

Rs 191 Rs 275 44%

Deccan Chronicle Holdings Ltd.

Investment Positive
Fastest growing print media company: expected to register a revenue CAGR growth of 37.1% over FY07-09 Highest EBITDA & PAT margins of 46.7% & 29.2% respectively as on FY07 backed by strong ad rates and lower operating cost & lower newsprint cost. Securitization of receivables & Cash rich company: Rs 7.2 bn cash & cash equivalents as on H1FY08. Lower capex in coming years to boost profitability further Value unlocking in subsidiaries: Odyssey India & Sieger Solutions Ltd. At the CMP of Rs.191, DCHL trades at a P/E of 14.5x & 11.2x of its FY08 and FY09 earnings. We initiate BUY recommendation with a 12 months price target of Rs.275 (16x FY09E EPS).

Deccan Chronicle Holdings Ltd.

Industry
Indian entertainment & media sector is expected to report a CAGR growth of 18% and reach Rs 1 tn in 2011 from current size of Rs 437 bn in 2006. Changing demographics & lifestyles , increasing literacy level and potential for higher ad spends as a percentage of GDP are expected to be the key growth drivers for Indian print sector. Indian print media is expected to grow at 13% CAGR during 2006-2011 & to reach a size of Rs 232 bn from its current size of Rs 128 bn.

Deccan Chronicle Holdings Ltd.

Company Background
Leading English daily newspaper in Andhra Pradesh & Tamilnadu, having a circulation of around 9,50,000 copies per day as on H107. DCHL entered Chennai region in 2005 in order to increase its spectrum & was successful in breaking the monopoly of The Hindu in a short span of one year. Entered into retail with 100% acquisition of Odyssey India Ltd. in sep2005, which is growing at a healthy pace and is expected to reach a total space of 5.02 mn with 173 stores by the end of FY09 DCHL formed a 100% subsidiary Sieger Solutions Ltd. in 2006 with an objective to become the sales agent for DCHL & to make a foray into new media businesses like internet & online portals. DCHL also holds 90% stake in Asian Age Holdings Ltd.

Deccan Chronicle Holdings Ltd.

Financials
Revenues and net profit are expected to report CAGR growth of 37.1% & 61.3% respectively over FY07-09 EBITDA margins are expected to expand to 62.6% & 63.9% in FY08 & FY09 respectively backed by higher realization, lower newsprint cost & cost efficiencies. PAT margin is expected to increase to 38.5% & 40.4% in FY08 and FY09 from the current level of 29.2% during FY07. ROCE and ROE are expected to improve to 39% and 31% respectively in FY09 driven by lower capex in coming years and margins expansion.

Deccan Chronicle Holdings Ltd.

Financials (Contd)

Year FY06 FY07 FY08E FY09E

Net Sales 3,308.8 5,527.8 8,454.6 10,388.9

Sales% Growth 99.8 67.1 52.9 22.9

EBITDA margin % 31.5 46.7 62.6 63.9

PAT 678.6 1,613.6 3,252.2 4,197.7

ROCE (%) 16.0% 22.7% 34.8% 39.0%

EV/ EBITDA 11.3 18.8 8.8 5.7

P/BV 12.4 5.5 4.0 3.1

EPS

(Rs) 3.0 6.6 13.2 17.1

P/E 64.5 29.2 14.5 11.2

Deccan Chronicle Holdings Ltd.

Valuation Matrix
Jagran* FY08E Revenues EBITDA EBITDA% PAT PAT% EPS CMP(as on 30/10/07) P/E x ROE% ROCE% 7905.4 1916.2 24.2% 1161.95 14.7% 19.3 675.1 35.0 21.65 24.35 FY09E 9662.3 2601.4 26.9% 1576.65 16.3% 26.15 675.1 25.8 28.05 29 HT Media* FY08E 12794.2 2627.8 20.5% 1617.5 12.6% 6.9 209.2 30.3 19.55 22.55 FY09E 15209.8 3422.9 22.5% 2187.5 14.4% 9.3 209.2 22.5 22.1 26.9 DCHL FY08E 8454.6 5291.5 62.6% 3252.2 38.5% 13.2 191.4 14.5 32.5 34.8 FY09E 10388.9 6638.1 63.9% 4197.7 40.4% 17.1 191.4 11.2 31.0 39.0

Deccan Chronicle Holdings Ltd.

Deccan Chronicle Holdings Ltd. BUY

Contact Persons : Institutional Sales Raj Bhandari / Rameshwar Singh D K Arora / Ninie Singh
Networth Stock Broking Ltd. 022-22633020/1/2 Email : dealing@nsbl.co.in

Retail Sales Satish Pasari

Networth Stock Broking Ltd. 022-30286405 Email : satish@nsbl.co.in

(For full report visit : www.networthstock.com)